Use our HVAC Business Valuation Calculator to discover your true worth.

To get the best purchase price for an HVAC business, owners must demonstrate a long-term record of consistent growth and financial performance. Let ServiceTitan’s HVAC Business Valuation Calculator crunch the numbers to find the best value.

HVAC Business Valuation Calculator

Interested in selling your heating, ventilation, and air conditioning business? Many factors come into play when determining your HVAC business worth, often resulting in a long, complicated process. To set up your small business for success, focus your efforts on building a business with strong leadership, culture, reputation in the market, and a long-term record of consistent growth and financial performance.

Once you’re ready to sell, choose a valuation method commonly used in the HVAC industry to determine the value of an HVAC business and set your asking price.

Two critical pieces of information make up the purchase price for an HVAC service business:

EBITDA x Multiple

  • EBITDA = Earnings Before Interest, Taxes, Depreciation, and Amortization. EBITDA is meant to measure cash flow. Buyers bid on your company’s net results, which are measured by EBITDA.

  • Multiple = The valuation a buyer pays is a multiple of your EBITDA, based on historical growth and expected future growth. 

The HVAC business worth calculation should also take into consideration any add-backs, or non-recurring personal expenses that go away once you sell the business. In addition, the multiplier may change depending on how much revenue is considered recurring versus non-recurring. The more recurring revenue (ongoing, long-term contracts) you have, the less risk for potential buyers.

As you grow your EBITDA, the valuations increase. For instance, a company valued at $5 million with a 10 multiple would have an enterprise value of $50 million. If the multiple is 5, the estimated value of your business is $25 million. 

Keep in mind that business valuation for HVAC business owners can be quite complex and may require professional expertise to determine the company’s value. As a rule of thumb, an accurate valuation helps to determine whether prospective buyers view your company as a viable option.

Gain insight into your HVAC company's worth by using the free ServiceTitan HVAC Business Valuation Calculator to find your best sale price.

How to Use this Calculator

To determine the value of your HVAC business, potential buyers want to see data on the following metrics:

  • Net Income: The annual profit generated by the HVAC business after deducting all expenses, including salaries, operating costs, and taxes.

  • Depreciation and Amortization: Non-cash expenses that reflect the decrease in value of assets over time. These are added back to the net income as they are not actual cash outflows.

  • Earnings Multiplier: A factor that represents the perceived risk and growth potential of the HVAC business, often derived from industry standards, comparable business sales, and market conditions.

The precise formula used for HVAC business valuation is:

Business Value = (Net Income + Depreciation & Amortization) × Earnings Multiplier

How to Value Your HVAC Business

ServiceTitan’s HVAC Business Valuation Calculator can help estimate the value of a business. Here's a step-by-step guide on how to use our valuation tool designed specifically for HVAC businesses:

  • Gather Financial Information:

  • Revenue: Collect the total revenue of your HVAC business for the last year or a specific period.

  • Expenses: Note all relevant expenses, including operating costs, materials, labor, and overhead.

  • Profit: Calculate your business's net profit by subtracting expenses from revenue.

  • Asset Value: Determine the value of assets such as equipment, vehicles, and property.

  • Enter Financial Data:

  • Input the revenue, expenses, and net profit into the calculator.

  • Provide Business Details:

  • Enter information about your HVAC business, including its location, years in operation, and whether it's a sole proprietorship, partnership, LLC, or corporation.

  • Industry-Specific Factors:

  • Enter the types of services you offer (installation, repair, maintenance), customer base (residential, commercial), and market demographics.

  • Market Conditions:

  • Indicate the current market conditions in your area. This could include the demand for HVAC services, competition, and economic trends.

  • Valuation Method:

  • Choose the valuation method that best suits your business situation. Here, we use the Earnings Multiplier method.

  • Review and Adjust:

  • After entering all the required information, review the calculated value.

  • Interpret the Results:

  • The calculator provides an estimated value for your HVAC business. Keep in mind, this is just an estimate and may not reflect the exact fair market value for your specific company.

  • Compare with Market Data:

  • Research recent sales of similar HVAC businesses in your area. Compare the calculator's estimate with actual sales data to get a better sense of your business's potential value.

  • Consult a Professional:

  • While our HVAC Business Valuation Calculator provides a rough estimate, it's advisable to consult with a business valuation expert.

  • Consider Other Factors:

  • Valuation calculators often focus on financial data, but there are other intangible factors that can affect your business's value, such as reputation, customer relationships, and future growth potential.

Additional considerations:

  • Earnings Multiplier: The earnings multiplier can be calculated using the Price-to-Earnings (P/E) ratio or the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) multiple. This multiplier reflects the market's assessment of the business's risk and potential for growth. The multiplier can vary based on factors such as industry trends, competitive landscape, economic conditions, and the HVAC business's historical performance.

  • Assets and Liabilities: In some cases, the value of tangible assets like HVAC equipment, vehicles, and property may be considered separately. Likewise, outstanding liabilities and debts need to be factored in.

  • Customer Base: The stability and diversity of the customer base can affect valuation. Long-term contracts, recurring revenue, and a solid client roster can enhance the value of the business.

  • Market Conditions: The overall economic conditions and the state of the HVAC industry can influence business valuation. A growing market may lead to a higher valuation, while a declining market might have the opposite effect.

  • Growth Trends: Businesses with strong growth prospects, innovative services, or expansion plans might command a higher valuation.

  • Location: The geographic location of the business can also affect its value due to differences in local market dynamics.

  • Competition: The competitive landscape and the HVAC business's position within it can affect its value. A unique selling proposition and a competitive advantage can contribute to a higher valuation.

  • Seller's Motivation: The reason for selling and the urgency of the sale can influence the final valuation.

How ServiceTitan Can Improve Pricing and Efficiency

ServiceTitan is a comprehensive software platform specifically designed to help HVAC businesses streamline their operations, enhance customer experience, and improve various aspects of their business, including pricing and efficiency. Here are 10 key ServiceTitan features companies use to improve pricing and efficiency:

  • Job Scheduling and Dispatching: Efficiently assign jobs to techs based on their availability, skills, and proximity to the job. Use the Enterprise Hub to manage and grow multiple HVAC locations.

  • Tracking Specific KPIs: Gain insights into how your HVAC business is doing and what can be improved by tracking specific key performance indicators on a consistent basis.

  • Pricing Consistency: Establish and maintain standardized pricing for services and products, including the ability to turn on automated price adjustments to keep pricebooks up to date.

  • Estimation and Invoicing: Generate accurate and professional estimates and invoices on-site, and keep all of your financials in tip-top shape.

  • Inventory Management: Track equipment, parts, and supplies to prevent overstocking, reduce unnecessary expenses, and ensure technicians are adequately equipped.

  • Customer Relationship Management (CRM): Maintain detailed customer profiles, service histories, and preferences to personalize interactions, enhance customer satisfaction, and support upselling and cross-selling opportunities.

  • Data Analytics: Insightful data, analytics, and reporting allows HVAC businesses to track key performance metrics, identify trends, and make informed decisions.

  • Mobile App for Technicians: Access the mobile app to view job details, update job statuses, process payments, and capture customer signatures.

  • Integration Capabilities: ServiceTitan seamlessly integrates with other software and tools commonly used in the HVAC industry, such as accounting software, payment gateways, and marketing platforms, to reduce data-entry duplication and enhance workflow efficiency.

  • Training and Support: ServiceTitan provides training resources, tutorials, and customer support to ensure HVAC businesses can maximize the platform’s benefits.

>>Ready to learn more about ServiceTitan? Sign up for a free demo.

Frequently Asked Questions

How does an HVAC business valuation tool work?

An HVAC business valuation tool collects and analyzes relevant data, including financial statements, revenue, expenses, assets, customer base, industry trends, and more. The tool uses various valuation methods to calculate a home service business's value based on its earnings potential, how it compares in the market, and tangible assets.

Why do I need an HVAC business valuation tool?

HVAC business valuation tools are helpful when buying or selling an HVAC company, as well as for mergers and acquisitions, partnership dissolutions, estate planning, tax purposes, and financial planning. By providing an objective estimate of the business's worth, business owners, investors, business brokers, and stakeholders can make informed decisions.

Are HVAC business valuation tools accurate?

The accuracy of an HVAC business valuation tool depends on the quality of the data provided and the methodology used. The tool can provide a rough estimate, but may not capture all the nuances of a specific business.

What factors are considered in an HVAC business valuation?

Factors include the company's financial performance (revenue, profit margins, cash flow), customer base, geographic location, industry trends, equipment and assets, management team, competitive landscape, and the overall economic outlook.

Can an HVAC business valuation tool account for regional differences?

Many HVAC business valuation tools consider regional differences, but some tools allow you to input specific location-related data to tailor the valuation estimate to the local market. Geographic location can affect factors such as customer demand, labor costs, and market competitiveness.

People Also Ask:

What is the average profit of an HVAC business?

The average profit of an HVAC business can vary significantly based on such factors as location, size of the business, market demand, competition, economic conditions, and the range of services offered. Profit margins can typically range from 5% to 15% or even higher for exceptionally well-managed companies.

What is the EBITDA multiple for HVAC companies?

This also varies, based on the same factors listed above. EBITDA is often used as a measure of a company's operating performance and cash flow. As you grow your EBITDA, the valuations increase.

How do I scale my HVAC business?

If you want to scale your HVAC business and increase your company’s valuation, focus on developing the following:

  • Strong growth rate

  • Consistently higher margins

  • Business mix (residential vs. commercial; new construction vs. service)  

  • Strong, predictable cash flow

  • Increased recurring revenues (more service maintenance agreements)

  • Strong bench strength and management team

  • Sufficient working capital to support growth

  • Strong brand name/identity

  • Audited financial statements

Selling your service company can be a complicated process. Use the ServiceTitan Business Valuation Calculator to understand what your business is worth, and gain insight on how ServiceTitan can improve your valuation.